15 Shareholder's equity

ISSUED CAPITAL

As of December 31, 2017, the share capital of Deutsche Telekom totaled EUR 12,189 million. The share capital is divided into 4,761,458,596 no par value registered shares.

2017

2016

thousands

%

thousands

%

Federal Republic of Germany – Berlin, Germany

689,601

14.5

676,971

14.5

KfW Bankengruppe – Frankfurt/Main, Germany

829,179

17.4

818,992

17.5

Free float

3,242,679

68.1

3,180,939

68.0

Of which: BlackRock, Inc., Wilmington, DE, United States a

234,194

214,174

4,761,459

100.0

4,676,902

100.0

a According to the last notification from BlackRock published on September 22, 2017, the reporting threshold of 3 percent of the voting rights was thus exceeded. The stake in Deutsche Telekom was thus 4.92 percent of the voting rights on September 15, 2017.

Treasury shares. The shareholders’ meeting resolved on May 25, 2016 to authorize the Board of Management to purchase shares in the Company by May 24, 2021, with the amount of share capital accounted for by these shares totaling up to EUR 1,179,302,878.72, provided the shares to be purchased on the basis of this authorization in conjunction with the other shares of the Company that the Company has already purchased and still possesses or are to be assigned to it under § 71d and § 71e AktG do not at any time account for more than 10 percent of the Company’s share capital. Moreover, the requirements under § 71 (2) sentences 2 and 3 AktG must be complied with. Shares shall not be purchased for the purpose of trading in treasury shares. This authorization may be exercised in full or in part. The purchase can be carried out in partial tranches spread over various purchase dates within the authorization period until the maximum purchase volume is reached. Dependent Group companies of Deutsche Telekom AG within the meaning of § 17 AktG or third parties acting for the account of Deutsche Telekom AG or for the account of dependent Group companies of Deutsche Telekom AG within the meaning of § 17 AktG are also entitled to purchase the shares. The shares are purchased through the stock exchange in adherence to the principle of equal treatment (§ 53a AktG). Shares can instead also be purchased by means of a public purchase or share exchange offer addressed to all shareholders, which, subject to a subsequently approved exclusion of the right to offer shares, must also comply with the principle of equal treatment.

The shares may be used for one or several of the purposes permitted by the authorization granted by the shareholders’ meeting on May 25, 2016 under item 6 on the agenda. The shares may also be used for purposes involving an exclusion of subscription rights. They may also be sold on the stock market or by way of an offer to all shareholders, or withdrawn. The shares may also be used to fulfill the rights of Board of Management members to receive shares in Deutsche Telekom AG, which the Supervisory Board has granted to these members as part of the arrangements governing the compensation of the Board of Management, on the basis of a decision by the Supervisory Board to this effect.

Under the resolution of the shareholders’ meeting on May 25, 2016, the Board of Management is also authorized to acquire the shares through the use of equity derivatives.

On the basis of the authorization by the shareholders’ meeting on May 25, 2016 described above and corresponding authorizations by the ­shareholders’ meeting on May 12, 2011 and May 24, 2012, 110 thousand shares were acquired in June 2011, 206 thousand shares in September 2011, and 268 thousand shares in January 2013. The total volumes amounted to EUR 2,762 thousand in the 2011 financial year, and EUR 2,394 thousand in the 2013 financial year (excluding transaction costs). This increased the number of treasury shares by 316 thousand and 268 thousand, respectively. Further, 90 thousand shares and 860 thousand shares were acquired in September and October 2015, respectively, for an aggregate amount of EUR 14,787 thousand (excluding transaction costs); these acquisitions increased the number of treasury shares by 950 thousand.

No treasury shares were acquired in the reporting period.

As part of the Share Matching Plan, a total of 2 thousand treasury shares were transferred free of charge to the custody accounts of eligible ­participants in the 2012 and 2013 financial years. A further 90 thousand treasury shares were transferred free of charge in the 2014 financial year. An additional 140 thousand treasury shares were transferred in the 2015 financial year. In the 2016 financial year, 232 thousand treasury shares were transferred. Transfers of treasury shares to the custody accounts of employees of Deutsche Telekom AG are free of charge. In cases where treasury shares are transferred to the custody accounts of employees of other Group companies, the costs have been transferred at fair value to the respective Group company since the 2016 financial year.

A total of 300 thousand treasury shares were reallocated in January, March, April, May, June, July, August, September, October, and December 2017 and transferred to the custody accounts of eligible participants of the Share Matching Plan. As of December 31, 2017, disposals of treasury shares resulting from the transfers in the reporting period accounted for less than 0.01 percent, or EUR 769 thousand, of share capital. Gains on disposal arising from transfers of treasury shares amounted to EUR 2,986 thousand. In the reporting year, 107 thousand treasury shares with a fair value of EUR 1,763 thousand were billed to other Group companies. Transfers of treasury shares increased retained earnings by EUR 511 thousand and in capital reserves by EUR 310 thousand.

As part of the acquisition of VoiceStream Wireless Corp., Bellevue, and Powertel, Inc., Bellevue, in 2001, Deutsche Telekom AG issued new shares from authorized capital to a trustee, for the benefit of holders of warrants, options, and conversion rights, among others. These options or ­conversion rights expired in full in the 2013 financial year. As a result, the trustee no longer had any obligation to fulfill any claims in accordance with the purpose of the deposit. The trust relationship was terminated at the start of 2016 and the deposited shares were transferred free of charge to a custody account of Deutsche Telekom AG. The 18,517 thousand ­previously deposited shares are accounted for in the same way as treasury shares in accordance with § 272 (1a) HGB. This equates to 0.4 percent, or EUR 48 million, of Deutsche Telekom’s capital stock. On the basis of authorization by the shareholders’ meeting on May 25, 2016, the treasury shares acquired free of charge may be used for the same purposes as the treasury shares acquired for a consideration.

Voting rights. Each share entitles the holder to one vote. These voting rights are restricted, however, in relation to treasury shares (at December 31, 2017: around 19 million in total).

Authorized capital and contingent capital. Authorized capital and contingent capital comprised the following components as of December 31, 2017:

Capital increase in connection with the dividend in kind. The resolution on the dividend of EUR 0.60 per share for the 2016 financial year gave shareholders the choice between payment in cash or having their dividend entitlement converted into Deutsche Telekom AG shares. In June 2017, dividend entitlements of Deutsche Telekom AG shareholders amounting to EUR 1.4 billion were contributed in the form of shares from authorized capital and thus did not have an impact on cash flows. Deutsche Telekom AG carried out an increase in issued capital of EUR 0.2 billion against contribution of dividend entitlements for this purpose in June 2017. This increased capital reserves by EUR 1.2 billion. The number of shares ­increased by 84.6 million.

Transactions with owners

The total of EUR 1,341 million shown under transactions with owners is made up of EUR 364 million from the share of equity held by the owners of the parent company, and EUR 977 million from the share held by non-controlling interests. These amounts result in part from the mandatory conversion of preferred stock issued by T-Mobile US in December 2014 into ordinary shares of T-Mobile US in December 2017. In connection with this, conversion rights embedded in this preferred stock were reclassified. In total, EUR 1,707 million was reclassified from financial liabilities to the capital reserves in a non-cash transaction. Taking into account the reduction in the ownership interest in T-Mobile US by around 2.4 percentage points as a result of the conversion, EUR 599 million relates to the share of equity held by the owners of the parent company, and EUR 1,108 million to the share held by non-controlling interests. Furthermore, by December 31, 2017, shares worth a total of EUR 375 million had been bought back under the T-Mobile US share buy-back program begun in December 2017. Of this amount, EUR 133 million related to the share of equity held by the owners of the parent company and EUR 242 million to the share held by non-­controlling interests. The effects for the reporting year and the previous year are shown in Deutsche Telekom’s consolidated statement of changes in equity as of December 31, 2017. Deutsche Telekom intends to acquire further ordinary shares in T-Mobile US in 2018.